London-based startups have secured a remarkable £2.69bn in venture capital (VC) funding in the first quarter of 2025, reflecting a promising start to the year for the capital’s innovation ecosystem.
The surge in London VC investment 2025 arrives despite a drop in deal volumes, suggesting that investors are backing quality over quantity.
KPMG’s latest Venture Pulse report reveals that while the number of deals fell compared to the previous quarter, the funding value reached nearly 90 per cent of the £3bn raised in the final quarter of 2024.
A total of 221 deals were recorded in Q1, signalling sustained interest from investors, particularly in fast-evolving technological sectors.
“The resilience of VC activity in London over the first quarter of 2025 underlines investor confidence in the innovation economy, with a clear focus on developments in AI”, said Anna Purchas, London office senior partner at KPMG UK.
AI Leads the Charge in London’s Startup Growth
Artificial Intelligence continues to dominate London’s tech funding landscape, with several of the largest capital injections focused on AI-driven innovation.
- Isomorphic Labs raised £450m to push forward its next-generation AI-powered drug design platform.
- Synthesia attracted £138m to enhance its AI video capabilities for enterprise communications.
“In 2024, London proved its status as a global hub for AI, with record investment flowing into our companies. Frontier innovation, including AI and life sciences, will be at the heart of London’s 10-year growth plan”, said Laura Cinto, chief executive of London & Partners.
Health and Life Sciences Shine in Q1
Alongside AI, the health and life sciences sector emerged as another major beneficiary, responsible for nearly half of the UK’s megabucks in Q1. Key contributors included Isomorphic Labs and Verdiva Bio.
“It’s exciting to see UK health tech firms thriving and attracting near-record investment, driven by AI innovations transforming the sector”, noted Simon Bumfrey of HSBC Innovation Banking.
Investors are becoming increasingly discerning, focusing their backing on companies with solid financial models and a clear route to profitability.
“In a financial climate that is currently fluctuating daily, investors are backing companies that offer the fastest path to profitability”, explained Nicole Lowe, UK head of KPMG’s emerging giants practice.
She cautioned that, while sectors heavy in intellectual property may be facing short-term hurdles, they remain pivotal to the UK’s long-term growth prosperity.
“We should ensure we’re doing all we can to make the investments more attractive”, she added.
London’s VC scene was buoyed by a powerful fundraising year in 2024, when VC firms collectively amassed $9.9bn – nearly twice the amount raised in 2023. Leading funds such as Atomico, Index Ventures, and Balderton closed substantial rounds, ensuring ample capital is available for deployment.
Catherine Lenson, COO of Phoenix Court, said: “With world-class talent, access to capital, and a supportive regulatory environment, a new generation of tech companies with the potential to become global champions are being born.”
London maintained its leadership position by attracting more VC investment in Q1 than France, Germany, and Spain combined. The city continues to produce a healthy stream of unicorns and boasts consistent deal flow supported by large, well-capitalised funds.
“The record-breaking investment in AI startups in 2024 highlights the strength of the UK’s talent pool. Tackling the talent bottleneck must now be a top priority if London is to maintain its global edge,” stated Hannah Seal of Index Ventures.
As London gears up for the upcoming London Tech Week, the strong Q1 figures serve as further proof that the capital remains among the world’s most vibrant and resilient startup ecosystems.
